Microsoft is laying off 1,850 to “streamline” its smartphone business, takes $950M charge

Following last week’s news of Microsoft selling off its feature phone business for $350 million, today Microsoft turned its attention to smartphones: the company announced it would lay off 1,850 staff and take a charge of $950 million, including $200 million in severance payments, as it “streamlines” the business to focus on enterprises and niche areas where it feels it can better differentiate.

“We are focusing our phone efforts where we have differentiation — with enterprises that value security, manageability and our Continuum capability, and consumers who value the same,” said Satya Nadella, chief executive officer of Microsoft, in a statement. “We will continue to innovate across devices and on our cloud services across all mobile platforms.”

On one hand, the move is not that surprising, considering that Microsoft has failed to spark much interest in its Lumia-branded smartphones since taking over the business from Nokia, with Android-based devices and Apple’s iPhone continuing to dominate sales and usage globally.

On the other hand, it is a little bit of a shock to see Microsoft doing this.

The feature phone business that it sold to a Foxconn-led consortium last week was never the primary interest for Microsoft, so it seemed like a very obvious move to finally pass it on to a group that was more interested in developing it and getting out what it could from the lower end of the market that is still buying these devices (which, interestingly, is still a pretty sizeable volume, if much lower value overall).

But the smartphone business, in contrast, was always the part that Microsoft wanted to see if it could replicate some of the same vertically integrated magic that Apple has so adeptly performed with the iPhone: control the platform, the apps, and the devices and you have a better chance of creating something unique that works, seemed to be the thinking that led it to buy Nokia’s mobile phone division back in 2013 for an initial consideration of $7.2 billion.

However, it just didn’t seem to be Microsoft’s time. It was partly because it was too late to enter the market with something that was effectively not a big enough iteration on what was already on offer.

And it was partly because the smartphones, at first, just weren’t as good. Remember all those missing apps that Microsoft had to work so hard to bring to its Windows mobile operating system? When you speak to many app developers today, they still view Windows as a maybe rather than a must-have.

Some 1,350 jobs at Microsoft Mobile Oy in Finland will go, as well as up to 500 additional jobs globally, the company said. Microsoft Oy employees, a separate Microsoft sales subsidiary based in Espoo, are not impacted, the company added.

But in general, it’s a pretty grim period for mobile technology workers in Finland: late last week Nokia also quietly announced that it would lay off just over 1,000 people in the country. It comes also some two years after a two much larger waves of cuts: first, the bulk of a round 18,000 layoffs announced in 2014; and then 7,800 more when it wrote down the value of its Nokia acquisition by an eye-watering $7.6 billion.

The layoffs announced today will be fully completed by July 2017, the company said, to coincide with the end of its fiscal year, the company said.

There was also an internal memo from devices EVP Terry Myerson that it looks like Microsoft has been sharing with symphathetic journalists, reiterating the news and trying to shore up staff morale around it. Microsoft also noted that it will be making a filing with the SEC with more details, so I’ll keep a look out for that to see if there’s any more to add to this story.